ASYMMETRIC PRICING AND AIRLINE PERFORMANCE

  • Yi Jiang Mihaylo College of Business and Economics,California State University, Fullerton
  • Tingting Que University of Alabama in Huntsville

Abstract

We study the relation of asymmetric pricing with operating performance and stock returns of U.S. airlines. We construct two proxies to measure the degree of asymmetric pricing: Degree of Asymmetry (DOA) and Peer-adjusted DOA, and then simultaneously test how the direction and magnitude of asymmetric pricing affect airline performance. We find that raising air ticket price, regardless of whether the fuel cost is increasing or decreasing, is associated with significantly higher sales growth and stock returns than reducing price in the same scenario. However, raising price above industry peers is two-edged: it may increase profit margin, but at the cost of a slowdown in sales growth.

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Published
2022-10-03
How to Cite
Jiang, Y., & Que, T. (2022). ASYMMETRIC PRICING AND AIRLINE PERFORMANCE. Applied Finance Letters, 11, 9 - 18. Retrieved from https://ojs.aut.ac.nz/applied-finance-letters/article/view/522
Section
Articles submitted to regular issue